Are you wondering whether or not you need a tax ID number to sell online? This guide will help you make decisions by providing you with examples.
William and Oliver both run online businesses. William has a mobile repair company and Oliver sells mobile accessories on Amazon. Are they required to have tax ID numbers? Let’s take a look.
Many people use the term tax ID number to refer to an Employer identification number (EIN). However, some people use this term to refer to a Resale Certificate. I’ll compare both and help William and Oliver decide which one they need.
Do I Need a Tax ID Number to Sell Online? (Be 100% Sure)
Do You Need an EIN to Sell Online?
If you are running a business as a Sole proprietorship or have an LLC, but your business has no managers or employees, you should use your personal Social Security Number instead of EIN. But if your business has an LLC and you have employees, then you will have to apply for an EIN.
As a sole proprietor, Oliver does not need an EIN. However, William owns an LLC and has employees and workers, he needs to obtain an EIN.
But if any of them are conducting a business in which they would be required to file an employment or excise tax return, they should have to apply for an Employer Identification Number.
What is EIN?
An EIN is like a Social Security Number for your business. An EIN stands for Employer Identification Number and, it is the tax identification number of the business.
As the name implies, an EIN is a number that the IRS issues to be able to tell businesses apart from one another. It is also called Federal Employer Identification Number.
Do You Need a Resale Certificate to Sell Online?
If you are selling products online, you may need a Resale Certificate because If you want to sell products online, You may be required to charge your customer’s sales tax and pay sales tax on the goods you sell.
Oliver is selling mobile accessories online, so he’ll probably need to charge sales tax to his customers for which he will need a Resale Certificate while Williams does not need one since he sells services rather than inventory.
What is a Resale Certificate?
A resale certificate, also known as a reseller’s permit and reseller’s license, is basically a signed document that helps the reseller buy goods from a wholesaler without paying sales tax.
The resale certificate makes it the retailer’s responsibility to collect the sales tax from the customer on the sale of the goods. Without the resale certificate, the buyer will have to pay sales tax on the items they want to resell.
In this guide, I help you to decide why you need a tax ID number to sell online with the help of two different online business examples. And I hope that after reading this guide, you will be able to decide which tax ID number (Employer Identification Number or Resale Certificate) you need for your online business.